What is CIP (Carriage and Insurance Paid To)?

CIP is CPT with insurance. Under Incoterms 2020 the insurance is stronger than under CIF: the seller must buy cover at the level of Institute Cargo Clauses (A), which is all risks, for at least 110% of the contract price. For the other rules, see what are Incoterms.

This is a general explanation, not legal, insurance or customs advice. Check the ICC's own text and your policy wording.

Why CIP matters

CIP gives the buyer a price with freight and insurance in it, for any mode of transport, so it suits air freight, road, rail and containers. The buyer receives cover without having to shop for it.

It is also one of the rules the 2020 edition changed. The 2010 version asked for minimum cover only. Now CIP asks for the widest standard cover, while CIF still asks for the minimum, Clauses (C), unless the parties agree otherwise.

Who does what under CIP

The seller

• Contracts for the carriage and pays the freight to the named destination.
• Clears the goods for export and hands them to the first carrier.
• Buys insurance under Institute Cargo Clauses (A) or similar all-risks cover, for at least 110% of the contract price and in the contract currency.
• Gives the buyer the policy or other evidence of cover, so the buyer can claim directly.
• Provides the commercial invoice and the usual transport document.

The buyer

• Carries the risk from the moment the goods are handed to the first carrier.
• Pays unloading costs at the destination, unless the seller's carriage contract includes them.
• Clears the goods for import and pays import duties and taxes.

The insurance covers at least the journey from the point of delivery to the named destination.

Where risk passes

Risk passes when the goods are handed to the first carrier, even though the seller paid for carriage and cover to the destination. The insurance is what protects the buyer, and the buyer is the one who claims on it.

An example from product sales

Say an industrial supplier's price for a batch of valves is $30,000 at its works. For CIP a buyer's warehouse, it adds $250 for export clearance, $2,100 of air freight and $150 for the insurance premium. Its CIP price is $32,500.

The cover must be at least 110% of that contract price: $32,500 × 1.10 = $35,750.

If the cargo is damaged in transit, the buyer claims on the policy the seller bought, up to the insured amount.

Common mistakes with CIP

• Mixing up CIP and CIF. CIF is sea only and asks for minimum cover.
• Not checking the policy. Ask for the certificate before the goods move.
• Reading CIP as delivered. Risk has already passed at the first carrier.
• Forgetting the cover period. It must run at least to the named destination. If the goods go on further, the buyer insures the last leg.

Related terms

• Incoterms: the 11 rules CIP belongs to.
• CPT: the same without the insurance.
• CIF: the sea version, with minimum cover.
• DAP: risk passes at the destination.
• Landed cost: the buyer's full cost after freight, duty and fees.

How PromptLab handles it

Choose CIP in the trade terms field on the sales order, which lists the 11 Incoterms 2020 rules, and write the destination and the insurance level in the order's note. If a customer always buys on CIP, store it as the account's preferred terms and each new order fills it in.

Frequently asked questions

What does CIP mean?

CIP means Carriage and Insurance Paid To. The seller pays carriage and insurance to the named destination, and risk passes to the buyer at the first carrier.

How much insurance does the seller buy under CIP?

Cover at the level of Institute Cargo Clauses (A), at least 110% of the contract price, in the contract currency.

What is the difference between CIP and CIF?

CIF is for sea and inland waterway transport and needs minimum cover (Clauses C). CIP is for any mode of transport and needs all-risks cover (Clauses A). Both need cover of at least 110% of the contract price.

Who claims on the insurance under CIP?

The buyer, because risk has passed to it. The seller gives the buyer the policy or evidence of cover.

Who clears customs under CIP?

The seller clears export. The buyer clears import and pays the duties and taxes.